AN ACT to amend and reenact article sixteen-e, chapter thirty- three of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating generally to the
regulation of limited benefits insurance policies; providing
definitions; providing limitations on premium rate
increases; providing for premium corrections; providing for
the amount and timing of premium corrections; requiring
reports to the commissioner; providing for civil penalties;
requiring notice of cancellation or nonrenewal; providing
requirements for limited benefits policy provisions;
allowing the insurance commissioner to prevent an insurer
from avoiding premium correction requirements by offering a
new form of policy or certificate; and requiring a report to
the Legislature by the commissioner.

Be it enacted by the Legislature of West Virginia:
That article sixteen-e, chapter thirty-three of the code of
West Virginia, one thousand nine hundred thirty-one, as amended,
be amended and reenacted to read as follows:

§33-16E-1. Scope of article.
The provisions of this article apply to all limited benefits
policies and certificates delivered or issued for delivery in
this state after the ninth day of July, one thousand nine hundred
ninety-three.§33-16E-2. Definitions.
For purposes of this article:
(a) "Limited benefits policy" means any individual or group
accident and sickness insurance policy, including all riders
thereto (and certificates in the case of a group policy), that
covers one or more residents of this state and that is not
required to offer or provide all benefits mandated by any other
applicable provision of this chapter. Such policies include, but
are not limited to, accident only, sickness only disability,
sickness only, accident only disability, hospital indemnity,
specified disease and travel accident insurance policies:
Provided, That the following types of policies and certificates
are excluded from the definition of "limited benefits policy":
(1) Credit accident and sickness insurance;
(2) Long-term care insurance;
(3) Medicare supplement insurance;
(4) Minimum benefits accident and sickness insurance issued
pursuant to section fifteen, article fifteen of this chapter or
article sixteen-c of this chapter;
(5) Accident and sickness policies which provide benefits for loss of income due to disability;
(6) Major medical policies;
(7) Dental policies; and
(8) Vision policies.
(b) "Limited benefits form" means a compilation of policy
terms that has been approved by the commissioner for use as a
prototype for limited benefits policies, or a compilation of
policy terms that has been used as the prototype for one or more
limited benefits policies, regardless of whether that compilation
has been approved by the commissioner. The existence of a form
may be inferred from the existence of one or more policies that
do not conform to any form that has been approved by the
commissioner. Limited benefits forms that are used by a
particular insurer and that, in the opinion of the commissioner,
are substantially identical with respect to the risks covered and
benefits provided shall be regarded as a single limited benefits
form.
(c) "Insurer" means an insurer that offers or has in force
any limited benefits policies.
(d) "Correction date" means the thirty-first day of December
of the year one thousand nine hundred ninety-nine and of every
third year thereafter.
(e) "Incurred claims" for a particular limited benefits form
during a particular period of time means the aggregate amount of
all claims incurred during that period on all limited benefits
policies based on that form, regardless of when individual claims
are paid: Provided, That if both West Virginia residents and residents of one or more other states are covered under a group
limited benefits policy, only claims incurred on behalf of West
Virginia residents shall be taken into account in determining the
amount of claims incurred on the policy.
(f) "Earned premiums" for a particular limited benefits form
during a particular period of time means the aggregate amount all
premiums earned during that period on all policies based on that
form, regardless of when specific premiums are paid: Provided,
That if both West Virginia residents and residents of one or more
other states are covered under group limited benefits policy,
only premiums earned for coverage extended to West Virginia
residents shall be taken into account in determining the amount
of premiums earned on the policy.
(g) "Net level premium" for a particular limited benefits
form means a hypothetical premium per limited benefits policy
that is of such amount that, over the lifetime of the limited
benefits policy beginning at the time of issue of the policy, the
present value of the net level premiums for the policy equals the
present value of the claims expected to be incurred on the
policy. The net level premium shall be determined using the same
assumptions as are used in pricing calculations, with appropriate
provision for adverse deviation.
(h) "Net level premium reserve" means a reserve calculated
so that at any point in time the reserve amount is the present
value of benefits expected to be incurred in the future minus the
present value of future net level premiums.
(i) "Modified net level premium reserve" means net level premium reserve reduced by the investment income component of
such reserve.§33-16E-3. Identification of level premium limited benefits
forms.
(a) A limited benefits form shall be regarded as a level
premium limited benefits form only if the form has been
identified as provided in this section.
(b) On or before the first day of December, one thousand
nine hundred ninety-eight, each insurer shall identify, in
writing to the commissioner, those limited benefits forms
approved by the commissioner (pursuant to section eight, article
six of this chapter) prior to the first day of July, one thousand
nine hundred ninety-eight, that are level premium limited
benefits forms.
(c) An insurer submitting a form to the commissioner for
approval (pursuant to section eight, article six of this chapter)
after the first day of July, one thousand nine hundred ninety- eight, shall clearly indicate, in the written documents filed
with the commissioner to submit the form, that the form is a
level premium limited benefits form.
(d) An insurer using a form that is not subject to prior
approval by the commissioner shall identify the form as a level
premium limited benefits form, in writing to the commissioner:
(1) On or before the first day of December, one thousand
nine hundred ninety-eight, if at least one policy based on the
form was delivered or issued for delivery in this state prior to
the first day of July, one thousand nine hundred ninety-eight; or
(2) Within six months of the first instance in which a
policy is delivered or issued for delivery in this state, if no
such policies were delivered or issued for delivery in West
Virginia prior to the first day of July, one thousand nine
hundred ninety-eight.
(e) A limited benefits form that is subject to prior
approval by the commissioner and that has not been so approved
shall not be regarded as a level premium limited benefits form.§33-16E-4. Premium rate increases.
(a) The commissioner may not approve a premium rate increase
for a limited benefits form unless the form is expected, over its
lifetime and given the rate increase, to return at least
seventy-five percent (in the case of a group form) or sixty-five
percent (in the case of an individual form) of its earned
premiums to policyholders and certificate holders as incurred
claims: Provided, That for purposes of this requirement, any
premium refunds that have been paid for the form pursuant to this
article shall be regarded as incurred claims. At the request of
an insurer, the commissioner may apply a minimum percentage that
is less then the applicable percentage otherwise provided in this
subsection if the insurer demonstrates to the satisfaction of the
commissioner that special circumstances justify the use of that
lesser percentage in order to allow the insurer a reasonable
profit on policies based on the form. Special circumstances
include, but are not limited to:
(1) The cost of developing the form is unusually high; or
(2) The expenses of marketing or administering the form are unusually high; or
(3) The form covers unusual risks or incorporates unique
features.
(b) For purposes of this article, the following shall be
treated as individual limited benefits forms:
(1) Forms used as a prototypes for limited benefits policies
(or certificates thereto in the case of group policies) that are
marketed to individuals through the mail or mass media
advertising, including both print and broadcast advertising; and
(2) Forms used as a prototypes for limited benefits policies
(or certificates thereto in the case of group policies), however
marketed, that are sold so that the individual insured makes the
decision to purchase the insurance and is responsible for paying
all costs of the insurance, including payment by salary
reductions for cafeteria plans under section one hundred twenty- five of the Internal Revenue Code.§33-16E-5. Premium corrections required.
(a) Except as otherwise provided in this section, an insurer
shall make a premium correction for a particular limited benefits
form and correction date if the comparison percentage for that
form and date is not at least sixty-five percent (in the case of
a group form) or fifty-five percent (in the case of an individual
form). At the request of an insurer, the commissioner may apply
a minimum percentage that is less than the applicable percentage
otherwise provided in this subsection if the insurer demonstrates
to the satisfaction of the commissioner that special
circumstances justify the use of that lesser percentage in order to allow the insurer a reasonable profit on policies based on the
form. Special circumstances include, but are not limited to:
(1) The cost of developing the form was unusually high; or
(2) The expenses of marketing or administering the form are
unusually high; or
(3) The form covers unusual risks or incorporates unique
features.
(b) The comparison percentage for a limited benefits form
that is not a level premium limited benefits form shall be
calculated by dividing the incurred claims for the form during
the three-year period ending on the correction date by the earned
premiums for the form during the same period, and multiplying
that quotient by one hundred: Provided, That for correction
dates after the thirty-first day of December, two thousand two,
comparison percentages for level premium limited benefits forms
also shall be calculated in this fashion.
(c) The comparison percentage for a level premium limited
benefits form shall be calculated as follows: Provided, That for
correction dates after the thirty-first day of December, two
thousand two, the comparison percentage for such forms instead
shall be calculated as described in subsection (b) of this
section:
(1) Add the incurred claims for the form during the period
that begins on the ninth day of July, one thousand nine hundred
ninety-three, and ends on the correction date, to the modified
net level premium reserve for the form as of the correction date:
Provided, That any premium refunds that have been paid for the form pursuant to this article shall be added to the incurred
claims when performing this calculation;
(2) Divide the sum thus obtained by the earned premiums for
the form during the period that begins on the ninth day of July,
one thousand nine hundred ninety-three, and ends on the
correction date; and then
(3) Multiply the quotient thus obtained by one hundred.
(d) If, in the opinion of the commissioner, a comparison
percentage that is calculated by the method described in
subsection (c) of this section would not accurately predict the
percentage of earned premiums returned to policyholders and
certificate holders over the lifetime of a particular limited
benefits form, the commissioner may require that a different
method be used to calculate a comparison percentage for the form.
(e) Notwithstanding any other provision of this section, an
insurer may not be required to make a premium correction for a
particular limited benefits form and correction date if the
earned premiums for the form during the period that begins on the
ninth day of July, one thousand nine hundred ninety-three, and
ends on the correction date is less than five hundred thousand
dollars.§33-16E-6. Amount and timing of premium corrections.
(a) A premium correction may be a refund of premiums, a
reduction in premiums, or an increase in benefits. All premium
corrections shall satisfy the requirements of this section, and
any refund or reduction of premiums, or increase in benefits that
does not satisfy those requirements may not be regarded as a premium correction for purposes of this article.
(b) The total amount of a premium refund for a particular
form shall equal the amount of additional claims that, if
incurred on the correction date, would cause the comparison
percentage for the form to equal the minimum percentage for the
form, with both percentages being determined according to section
five of this article. The refund shall be allocated among those
persons who are policyholders as of the correction date for which
the refund is made. Individual refunds shall be in proportion to
the total amount of premiums earned for each individual's policy
over the entire period that the policy has been in force. A
premium refund that satisfies the requirements of this section
shall not be regarded as an instance of unfair discrimination in
rates or premiums for purposes of subsection (7), section four,
article eleven of this chapter or as a rebate of premiums for
purposes of subsection (8), section four, article eleven of this
chapter.
(c) A reduction of premiums or an increase in benefits shall
be such that the amount returned to policyholders or certificate
holders as incurred claims over the lifetime of the form is at
least equal to the minimum percentage for the form determined
according to section five of this article: Provided, That for
purposes of this requirement, any premium refunds that have been
paid for the form pursuant to this article shall be regarded as
incurred claims. Once implemented, the reduction or increase
shall affect all policies, whether newly issued or renewed, that
are based on the form for which the correction is made.
(d) A reduction of premiums or increase in benefits must be
approved in advance by the commissioner. The commissioner may
approve a reduction or increase only if the insurer establishes,
to the satisfaction of the commissioner, that the reduction or
increase satisfies the requirements of this section. Prior to
approving or disapproving a reduction or increase, the
commissioner may request, and the insurer shall provide, all
information that, in the opinion of the commissioner, is
reasonably related to the commissioner's decision. To evaluate
a reduction or increase, the commissioner may retain
professionals or specialists, including, but not limited to,
independent actuaries, to perform services that are reasonably
necessary to evaluate the reduction or increase. The cost of
those services shall be borne by the insurer that has requested
approval of the reduction or increase: Provided, That the amount
borne by an insurer in connection with a single reduction or
increase shall not exceed two thousand five hundred dollars.
(e) Premium refunds shall be tendered to individual
policyholders, and reductions in premiums or increases in
benefits shall be implemented, on the later of the first day of
October of the year immediately following the correction date for
which the correction is made or the date which is sixty days
after the commissioner issues a decision on a request for
approval of a reduction in premiums or an increase in benefits.
Every individual premium refund tendered later than the required
tender date shall include interest for the period beginning on
the required tender date and ending on the date on which the refund is tendered, at the rate established by the tax
commissioner under section seventeen-a, article ten, chapter
eleven of this code as of the actual tender date. The
commissioner may withdraw approval of a premium reduction or
benefit increase that is not implemented by the date required by
this subsection unless the insurer establishes to the
satisfaction of the commissioner, that the failure to implement
the reduction or increase by that date was neither willful nor a
result of the insurer's negligence. Insurers shall request
approval of a premium reduction or benefits increase no later
than the first day of July of the same year: Provided, That the
commissioner may accept a request for approval made after that
date if, in the opinion of the commissioner, the timing of the
request will not impair the commissioner's evaluation of the
request and will allow any such reduction or increase to be
implemented on or before the date required by this subsection.
If the requirements of any other state or federal law restrict
the implementation of any premium reduction or benefit increase
on the date otherwise required by this subsection, such reduction
or increase shall be implemented on the earliest date allowed by
such other state or federal law.
(f) A premium refund that, once allocated, would result in
individual refunds of less than ten dollars per policyholder may
be retained by the insurer and placed in a fund to be used to
offset any future rate increases for the form: Provided, That if
the insurer subsequently pays individual refunds for the same
form, any amount earlier placed into the fund for the same form shall be added to the amount of the premium refund, and the total
amount allocated among individual policyholders as described in
subsection (b) of this section.
(g) Notwithstanding any other provision of this article, if
a particular limited benefits policy was issued for delivery
prior to the ninth day of July, one thousand nine hundred ninety- three, an insurer shall not be required to pay individual refunds
to the holder of that policy.§33-16E-7. Report to be filed with commissioner; form;
examinations.
(a) Every insurer shall annually file with the commissioner
a report on the limited benefits forms used or available for use
by the insurer during the period.
(1) The report shall be filed no later than the first day of
June: Provided, That the commissioner for good cause shown may
extend the filing date for a particular report for up to ninety
days.
(2) The report shall be prepared on a form prescribed by the
commissioner, and shall contain all of the information required
by that form. The report shall provide this information for
every limited benefits form actually used by the insurer during
the preceding calendar year, and for every form that as of the
final day of the reporting period was approved by the
commissioner.
(3) The report shall be executed by the insurer in the
manner prescribed by the commissioner.
(b) The commissioner may examine the records and files of any insurer to determine whether the insurer has complied with
the provisions of this article.§33-16E-8. Penalties.
(a) Any insurer that fails to comply with the provisions of
this article is subject to the following civil penalties:
(1) An insurer that has failed to file a limited benefits
report by the applicable filing date (determined with regard to
any extensions of time granted by the commissioner) is subject to
a penalty of two thousand five hundred dollars, and an additional
penalty of two thousand five hundred dollars for each month or
fraction thereof during which the failure continues;
(2) An insurer that has filed a report that is incomplete or
inaccurate in any material respect is subject to a penalty of two
thousand five hundred dollars, and an additional penalty of two
thousand five hundred dollars for every month or fraction thereof
during which the insurer fails to correct all material defects in
the report; and
(3) An insurer that has failed to make a premium correction
during the time prescribed by this article is subject to a
penalty of five thousand dollars, and an additional penalty of
five thousand dollars for each month or fraction thereof during
which the failure continues.
(b) Penalties established by this section may not be imposed
if the insurer establishes, to the satisfaction of the
commissioner, that the failure upon which the penalty is based
was neither willful nor a result of the insurer's negligence.
(c) Penalties imposed under this section shall be paid to the commissioner, who shall transfer amounts so received to the
general revenue fund of this state. A penalty shall be due when
the insurer receives written notice from the commissioner stating
the amount of the penalty and describing the failure for which it
is imposed. Notice of a penalty does not preclude the imposition
of additional penalties for subsequent months or fractions
thereof during which the failure identified in the notice
continues, or the imposition of penalties for other failures.
(d) The imposition of penalties under this section are in
addition to, and not in lieu of, any other penalties, charges,
sanctions, or liabilities allowed by law.§33-16E-9. Notice of cancellation or nonrenewal.
No insurer may cancel or nonrenew a limited benefits policy,
or a certificate thereto in the case of a group policy, unless
written notice of such cancellation or nonrenewal is forwarded to
the policyholder or certificate holder not less than sixty days
prior to the expiration date of the policy or certificate.

(a) If a limited benefits policy replaces another limited
benefits policy providing similar coverage, the insurer issuing
the replacement policy shall waive any time periods applicable to
preexisting conditions, waiting periods, elimination periods and
probationary periods in the new limited benefits policy to the
extent that such time was spent under the original policy or
certificate.
(b) If a limited benefits policy replaces another limited
benefits policy providing similar coverage that has been in
effect for at least six months, the replacement policy may not
provide any time periods applicable to preexisting conditions,
waiting periods, elimination periods and probationary periods.

§33-16E-11. Applicability of other provisions.

Except as otherwise provided, all the provisions of article
fifteen of this chapter are applicable to individual limited
benefits policies and all provisions of article sixteen of this
chapter are applicable to group limited benefits policies.§33-16E-12. Commissioner to promulgate rules.
The commissioner may promulgate rules in accordance with the
provisions of chapter twenty-nine-a of this code regarding the
implementation, regulation and enforcement of the provisions of
this article.§33-16E-13. Commissioner's authority to reject new policy or
certificate forms.
The commissioner may disapprove any new limited benefits
form if the commissioner determines that the new form likely will
be used by the insurer in lieu of an existing form so as to allow
the insurer to avoid making premium corrections on the existing
form.§33-16E-14. Commissioner's report to the Legislature.
The commissioner shall prepare a report to the Legislature,
to be delivered during the regular session of the Legislature
held in the year two thousand two. The commissioner's report
shall evaluate the provisions of this article (including, but not limited to, the provisions that establish a method for computed
comparison percentages for level premium limited benefits
policies) and may include proposed changes or alternatives to
those provisions.